Corporate scandals among the ways yakuza hurt Japan

Originally published by Asia Times

This is the fourth of a five-part series on the yakuza’s still wide reach in Japan. Part one is here; part 2, here; part 3, here.

Does it really matter that organized crime is firmly entrenched in the Japanese economy and society?

Because Japan is the world’s third largest economy and is in most respects, an attractive and safe society and a stable place to do business, Westerners tend to downplay – if not ignore – yakuza influence and attendant risks. However, consider everything already noted in this series and ask if it would matter if it were being said about the United States and the Sicilian Mafia. It would.

There are many reasons why Yakuza influence matters in Japan.

First, from an economic and societal perspective:

Organized crime puts a straitjacket on the entire economy. Japan’s experience during and after the Bubble Era of the 1980s and early 1990s is illustrative. When the bubble finally burst and initial efforts were made to clean up the furyosaiken (non-performing real estate loans that played a large part in inflating the bubble), it was discovered that a considerable percentage of the money had been lent to yakuza and their affiliated companies, and there were also plenty of corrupt politician and bankers involved.

The high-profile murders of two bankers charged with collecting the loans ensured no serious effort would be made to address the bad loan problem. Arguably, failure by the government to address this in the early stages had a snowball effect and was the proximate cause of two decades of economic stagnation.

Next, yakuza encroachment and displacement of legitimate business – being difficult or impossible to regulate or tax – provides recurring and (and expanding) income sources that further strengthen underworld power and political influence.

And, the yakuza do not pay taxes on much of their income anyway – or they only pay what they want. This deprives the government of revenue that might be used for more productive things, such as increased defense spending or to eliminate high-school fees for all Japanese students or to support struggling single mothers.

Organized crime payoffs and fraud are also a tax on business. Yakuza payoffs connected with a single Tokyo real estate redevelopment project in the late 2000s were over US$200 million (although another major real estate project in Roppongi around that time reportedly only needed to make a bargain basement payment of US$35 million to yakuza to ensure things went smoothly). Such payoffs still happen.

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